Who Loves the Sun?

November 21, 2017

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From the top of a Downtown skyscraper, looking west, there’s a better chance of catching the twinkling reflection of a rooftop solar panel than if you set your gaze to the east. Austin Energy’s solar incentive program has made great strides recruiting affluent residents to its zero carbon emission agenda, but it has historically been less successful at straddling the city’s economic divide. In an effort to reach underserved markets, the public utility is currently considering a drop in its rebate on solar panel installations for residential to a flat rate as a means of pivoting its demographic focus from homeowners to renters. Senior officials at Austin Energy say this transition is an anticipated step in a greater strategic timeline for the solar program, but unaffiliated experts and activists both point to the uncertainty of a precarious solar market and the challenges statewide of reaching low-income energy users.

Since its launch in 2004, the city’s solar incentive program has helped more than 6,700 Austinites transform the tops of their single-family homes into renewable energy generators. These residential photovoltaic systems contribute to Austin Energy’s overall solar generation, adding to power captured from commercial solar roofs, utility-scale solar facilities, and community solar projects – systems located on public land that can be accessed through the utility. This past year, the utility added five megawatts (MW) of new solar power capacity, bringing the cumulative amount up to 78 MW, enough to power 12,000 homes. AE hopes to reach a total of 200 MW by 2025, as part of its greater benchmark of offsetting 55% of its customer load with renewable energy by that year. “Five of the largest 20 cities in the United States happen to own their own electric utility. Two of them are in Texas: Austin and San Antonio. We can do things that other utilities can’t do, because we’re community-owned and not profit-based,” said AE spokesperson Robert Cul­lick. “This year we will achieve 40% renewable power in our service area. I don’t think you’ll find any other [utility] in the country that’s at 40%.”

A study published in October by nonprofit 1PlanetSol confirmed that the city’s wealthier ZIP codes were benefiting the most from the program’s offerings.

Cullick’s macro-level confidence extends to AE’s solar incentive program itself, which targets both the commercial and residential sectors to buy into solar – although the bulk of the growth has been residential. Program participants save money by earning a rebate to help pay for a contractor to install the panels; and after the panels are operational, by receiving a monthly bill credit which decreases the household’s overall electricity costs. Cullick said those credits will allow the average participant to recoup the upfront cost of installing panels within eight to 10 years of installation.

When the program began in 2004, the incentive was calculated at $5 per watt. Deborah Kimberly, AE’s vice president of Customer Energy Solutions, said the incentive has fallen steadily since, in correspondence to the program’s budget and changes in the global market. In 2014, rising demand for a more predictable and transparent version of the rampdown process prompted AE to develop a capacity-based approach, where incentive levels – ranging from $0.90 per watt to $0.40 per watt – have planned caps on subscriber volume. Today, two capacity options remain at $0.50 per watt and $0.40 per watt.

“In the case of 2017 and 2018, if we had gone in accordance with the original rampdown process, the residential incentives would have dropped off when we filled that last capacity bucket,” Kimberly said. Instead, “after the $0.40 per watt level is [fully] subscribed, we’re looking at doing a simplified process for applying for an incentive. Pending approval from the management team, we’re probably going to a flat incentive.”

Dedicating fewer subsidies to installation rebates will free more of Austin Energy’s resources to be invested in community projects. The utility has set a goal of spending $500,000 of its FY 2018 local solar budget on initiatives targeting underserved markets, like the 185 kW community solar array at the Palmer Events Cen­ter, which already has 23 subscribers. By the end of the year, the La Loma community solar farm is expected to be operational at the intersection of Airport Boul­e­­vard and Springdale Road.

This redirection was steered by a City Coun­cil resolution, approved Oct. 5, that also asked for regular updates on AE’s “Shared Solar” program, which will experiment with redistributing solar rebates among multifamily tenants starting next September. “If you live in an apartment complex with 100 people, and they put solar panels on the roof, the financial benefit would go to your landlord. It would not go to your electric bill,” noted Council Mem­ber Greg Casar, who introduced the resolution. Kimberly said AE is talking with several interested parties, and she believes they will be able to overcome the hurdles of merging billing, parsing metering, and determining rates. “We’re thinking we can get at least two to three projects up and running by the end of next year.”

The collective hope is that community projects will prove more capable of attracting the renter market that the solar incentive program thus far has had trouble reaching. Renters make up the majority of Austin’s residents and the public utility’s clientele, and their median household annual income is under $40,000 – the median household annual income for homeowners is $86,000. Due to the city’s rapid growth, however, catering to renters does not necessarily serve the city’s less fortunate. Austin saw a 31% increase in renters who earn over $150,000 per year in 2014, compared to a 14% increase in homeowners making the same amount. Taking these demographic changes into account, AE’s policy recalibration may end up favoring the rich as the solar incentive program has in the past.

A study published in October by nonprofit 1PlanetSol confirmed that the city’s wealthier ZIP codes were benefiting the most from the program’s offerings. Based on data from public records requests, the report concluded that ZIP codes with a median family income higher than the Aus­tin average ($57,689) garnered 75% of all solar rebates, with the 78746 ZIP code (Rol­ling­wood and West Lake Hills) earning the most, at 390, amounting to $4,898,050 in rebates.

“There’s a long-term economic benefit for going solar,” said 1PlanetSol team lead Scott Nguyen. “The way Austin Energy has set up their incentive program, although it has led to greater solar adoption, there’s still this high upfront cost. So those long-term economic benefits have not been able to reach low-income households.” The average cost of a typical 5 kW solar system installation is over $10,000. Moreover, the income tax deduction made possible by procuring solar panels is only appealing if a household’s deductions would exceed the standard.

Kimberly said she was surprised by the results of the study, and took issue with its methodology. “Doing it by ZIP code is not terribly granular,” she said. “If you live in the Bouldin neighborhood, you will see some very modest, older homes, and then you’ll see some big homes that have been reconstructed. ZIP code alone has a lot of variation in demographics.” In other words, the fabric of the city’s income distribution is more diverse than it appears when sectioned off by postal code.

Contrary to the program’s long-term trends, Nguyen said that the rebate allocation among income levels has grown more proportionate in the past few years, with the biggest increase being in the $40,000-58,000 bracket, or just below Austin’s median family income. This middle-class uptick in solar investment, he said, can be explained by solar panel prices dropping dramatically and becoming more affordable, but it was also the result of a targeted 2011 UT-Austin study in the Mueller community that added a $0.50 per watt incentive on top of the AE rebate. Nguyen said that funding more community-centric projects could go a long way in closing the existing income gap in the program. That suggestion could be foiled, though, if the Trump administration decides to impose tariffs on foreign solar cell and module imports.

In April, two U.S. solar manufacturers, Suniva and SolarWorld Americas, filed a petition under Section 201 of the 1974 Trade Act requesting that the president implement tariffs on solar imports from China. (Suniva had declared bankruptcy that same month.) The petition argues that it is impossible for U.S. solar companies to compete with China’s massive output. According to the World Trade Organization, the value of solar imports spiked from $5.1 billion in 2012 to $8.3 billion in 2016. “At least eight domestic [solar] cell and module producers have been forced to file for bankruptcy, shut down production facilities, or lay off employees since 2012,” the petition reads. “Without relief, Suniva certainly will be out of business permanently, and further closures affecting the remaining domestic production are anticipated in 2017.”

Specifically, Suniva and SolarWorld are asking the president to institute a tariff of $0.25 per watt on solar cells and $0.32 per watt on modules. In addition, the companies recommend that the president either place a floor price of $0.74 per watt on all solar imports or set an import quota of 0.22 gigawatts for cells and 5.7 gigawatts for modules. In September, the U.S. International Trade Commission made a recommendation to the president in favor of the petition filers, citing the “serious injury” on the domestic solar industry. The president is expected to issue an order in response to the case by January.

We can do things that other utilities can’t do, because we’re community-owned and not profit-based.”

Although Suniva and SolarWorld made claims about losses to the domestic workforce, other solar companies have disputed the claim that tariffs will provide any relief. In an August letter to the International Trade Commission, a group of 27 domestic solar manufacturers and suppliers objected to the speculation of the petition and argued that tariffs would not revive the industry; they would only revive the high upfront costs of panels. “The solar industry is fundamentally different from both consumer products and other durable goods,” the letter reads. “If someone needs to buy tires, they can only put off the decision for so long. Few homeowners, businesses or utilities need to buy solar, although millions want to buy solar. … The tariffs requested by Suniva would more than double the price of solar panels in the U.S., undercutting the cost-competitiveness of solar and reversing its high growth trajectory.”

These 27 companies are not the only ones with something to lose, however. Millions of low-income Texas households struggle every year to power their homes, and rising energy costs can reinforce constraints on economic mobility. Dana Harmon, executive director of the Texas Energy Poverty Research Institute, said that low-income households bear more of an energy burden than households at other income levels. According to a study conducted by the Energy Institute at UT-Austin, Texas households that earn less than $25,000 per year end up spending 12.5% of that annual income on energy, whereas households making more than $25,000 spend 4% on average. “About 3.5 million people in Texas are below 200% of the federal poverty line,” said Harmon. “Energy burdens tend to increase as you move toward more and more severe levels of poverty.”

Solar programs in other states have had some success reaching low-income consumers, most notably in New Jersey, where 34% of solar households are below the state’s median income. Nguyen said that 1Plan­et­Sol is working on a new study that will dive into the available data to figure out why some states do better. “There’s two key questions: One is what should a solar program’s income distribution look like, and that’s something that City Council would have to decide,” he said. “The second question is, once we have a target income distribution, what policies and projects will best lead toward that distribution?”

TEPRI published a working paper in May advocating for community solar options as opposed to programs that focus on reducing upfront costs, claiming that evidence shows the latter has not produced increased rates in solar adoption by low-income households. Community solar provides an opportunity to lower the price per watt through aggregation of the system, to broaden access to consumers in various geographic and living situations, and to contribute to a utility’s energy efficiency goals. The report’s reasoning seems simple when laid out on the printed page, but examples like Austin Energy’s La Loma project prove how applying these ideas in the real world can be more complicated.

A couple of years ago, Springdale-Airport Neigh­bor­hood Association president Peter Rivera walked out of his house to find multiple trucks pulled up behind his backyard. As he got closer, he noticed that signs on the side of the trailers were for solar panel contractors. “That’s when I first heard that Austin Energy was building a solar farm,” he said.

The neighborhood has generally been excited about the opening of the La Loma project, Rivera said, which is being constructed by local firm Powerfin Texas Solar Projects at the Austin Energy Kingsbery substation. But it didn’t start out that way. Many people in the area want to convert to clean energy; to join the fight against global warming, but the program’s premium prices have proved prohibitive for much of the neighborhood, where the median family income ($41,000) is lower than the Austin average. “We weren’t happy to hear that they were building something in the community that most people [couldn’t afford],” he said. “It doesn’t make much sense for people on fixed incomes or who don’t make a lot of money.” La Loma subscribers – who need not live in the neighborhood, just be AE residential customers – will pay $10-19 extra on their average monthly utility bill.

Dave Cortez, an organizer with the local chapter of the Sierra Club, said that initially the surrounding community had demanded that they get first access to the program and that they should be entitled to a discount. He and the neighborhood had proposed adding a fee to the bill of rebate customers in West Austin to help subsidize the discount for the prospective Eastside solar customers. “Apparently that’s just not possible. I don’t really understand why,” Cortez said. “It makes sense to me, because those folks with those big expensive systems on their rooftops are really not paying much at all. A lot of them have already recovered their [upfront] expenses.”

While AE has not formalized a priority system for onboarding people in the area, Kimberly said the utility has focused marketing efforts in the Springdale neighborhood. More­over, the utility has specifically targeted customers who could benefit from their Weather­iz­a­tion Assist­ance program. Rivera, who used to work as a contractor for that program, appreciates the energy savings made possible by fixing up leaks in a house. He considers the opportunity to subscribe to community solar and weatherization simultaneously a boon for residents. “It’s better than nothing,” he said.

There remains a fear that the premium prices for community solar could exacerbate trends of gentrification. AE has been proactive in meeting with the neighborhood about the project, and agreed to rename the project “La Loma” (Spanish for “the hill”) in reference to the neighborhood; Spring­dale is known for its rolling terrain. Rivera said that he has been told there will also be an educational center attached to the solar farm where children from nearby schools will be able to learn about how solar energy works. At the same time, without committing to signing up low-income households in the area, Cortez said, AE risks furthering the displacement of the community. “It’s not really ‘community’ solar in the traditional sense,” he said.

Kimberly said she doesn’t see any correlation between gentrification and renewable energy cost barriers. She believes that community solar will reach more people in general because it does not require the upfront installation costs and does not require that customers own their home. “By and large, if you’re a renter, you can’t use solar,” she concluded. “I don’t care if you’re living in a highrise in Downtown Austin where you’re paying a million dollars, or if you’re living in East Austin.” She said she owns her own home and earns a comfortable salary, yet still had an incentive to participate in community solar (she was one of the first subscribers) because she did not have to pay for installation.

In time, the extra charge of community solar is likely to drop, just as the cost of solar panels did. Unfortunately, the quest to include low-income households in renewable energy ventures is not as simple as making prices affordable, and policymakers have yet to discover the key to unlocking that segment of the market. “One-size-fits-all doesn’t work when it comes to low-income programs,” Harmon said. “Pro­grams must be designed for the specific needs of a given community.”

Travis County’s Property Assessed Clean Energy program, in collaboration with Austin Energy, employed one alternative approach when it pioneered its first solar project at Family Elder­care, a nonprofit in Austin. Through a long-term financing arrangement, PACE enabled Family Elder­care to do an energy efficiency assessment, upgrade its roof, and install solar panels. Still, PACE has a broader scope than solar, and fewer resources than AE, so momentum has been hard to build, said its director Charlene Heydinger. “Sometimes I get frustrated, because I feel like we run the greatest program nobody’s ever heard of,” she said. “When you do something new in the market, nobody wants to go first.”

Then again, perhaps considering the problem in market terms is the issue, said Cortez, because there is ultimately no cost-effective way to correct economic imbalances: “Take energy efficiency, for example. If you go weatherize a bunch of poor people’s homes and help them save money on their bills, it’s going to cost a lot more money than it would to go help some business that wouldn’t take as much repair.”

By expanding beyond its solar incentive program, Austin Energy has renewed its pursuit of a proper people-before-profit mentality, but conflating renters with low-income households may hold it back from energizing a bright future for everyone.